Thread: Circular flow diagram

Hello there,

I'm a little confused about this problem. Could anyone give me an example of how to construct a circular flow diagram? Will they always look the same, or do they sometimes include different traders and different flows of goods/services and money?

Using a circular-flow diagram, identify the flows of goods and services and the flows of dollars for each of the following activities:
a. Sam pays a storekeeper $2 for a half gallon of milk.
b. Sally earns $8 per hour working at a fast food restaurant.
c. Susan spends $12 to see a movie.
d. Stuart receives $20,000 in dividends from his shares in Apple Computer.

Originally Posted by Foxglove

Hello there,

I'm a little confused about this problem. Could anyone give me an example of how to construct a circular flow diagram? Will they always look the same, or do they sometimes include different traders and different flows of goods/services and money?

Using a circular-flow diagram, identify the flows of goods and services and the flows of dollars for each of the following activities:
a. Sam pays a storekeeper $2 for a half gallon of milk.

Draw two dots or circles, one representing Sam, the other the storekeeper. That will be one arrow from Sam to the storekeeper labeled "$2" and another arrow from the storekeeper to Sam labeled "half gallon of milk".

b. Sally earns $8 per hour working at a fast food restaurant.

Draw two dots or circles, one representing Sally, the other the restaurant. That will be one arrow from Sally to the restarant labeled "one hour of work" and another arrow from the restaurant to Sally labeled "$8".

c. Susan spends $12 to see a movie.

Draw two dots or circles, one representing Susan, the other the theater. That will be one arrow from Sally to the theater labeled "$12" and another arrow from the theater to Susan labeled "one movie".

d. Stuart receives $20,000 in dividends from his shares in Apple Computer.

Draw two dots or circles, one representing Stuart, the other Apple Computer. That will be one arrow from Stuart to Apple Computer labeled with whatever Stuart payed for his shares and another arrow from Apple Computer to Stuart labeled "$12000".